INVESTMENT BANKING ASSIGNMENT ON

DUEDELLIGENCE PROCESS

Submitted

To

Prof. K.SUNDRA RAM

BY

KISHORE KUMAR KORLA (113)

K.LOHITHA (112)

SINDHURA.CH (106)

D.VENKATA KIRAN (108)

ANISHA AMBROSE (101)

D.SREE SRAVYA (121)

Section: C

1226209113

MBA IBF (2009-2011)

GITAM INSTITUTE OF INTERNATIONAL BUSINESS

Visakhapatnam

Due diligence is a program of critical analysis that companies undertake prior to making business

decisions in such areas as corporate mergers/acquisitions or major product purchases/sales. The

due diligence process, whether outsourced or executed in-house, is in essence an attempt to

provide business owners and managers with reliable and complete background information on

proposed business deals, whether the deal in question is a proposed acquisition of another

company or a partnership with an international distributor, so that they can make informed

decisions about whether to go forward with the business action. The [due diligence] process

involves everything from reading the fine print in corporate legal and financial documents such

as equity vesting plans and patents to interviewing customers, corporate officers, and key

developers. The ultimate goal of such activities is to make sure that there are no hidden

drawbacks or traps associated with the business action under consideration.

The due diligence process is applied in two basic business situations: 1) transactions involving

sale and purchase of products or services, and 2) transactions involving mergers, acquisitions,

and partnerships of corporate entities. In the former instance, purchase and sales agreements

include a series of exhibits that, taken in their entirety, form due diligence of the purchase. These

include actual sales contracts, rental contracts, employment contracts, inventory lists, customer

lists, and equipment lists. These various "representations" and "warranties" are presented to back

up the financial claims of both the buyer and seller. The importance of this kind of due diligence

has been heightened in recent years with the emergence of the Internet and other transformative

technologies. Indeed, due diligence is a vital tool when a company is confronted with major

purchasing decisions in the realm of information technology. A due diligence investigation

should answer pertinent questions such as whether an application is too bulky to run on the

mobile devices the marketing plan calls for or whether customers are right when they complain

about a lack of scalability for a high-end system.

In cases of potential mergers and acquisitions, due diligence is a more comprehensive

undertaking. "The track record of past operations and the future prospects of the company are

needed to know where the company has been and where its potential may carry it.

Origin of the term "due diligence"

The term "due diligence" first came into common use as a result of the United States' Securities

Act of 1933.

This Act included a defense at Sec. 11, referred to as the "Due Diligence" defense, which could

be used by broker-dealers when accused of inadequate disclosure to investors of material

information with respect to the purchase of securities. So long as broker-dealers exercised "due

diligence" in their investigation into the company whose equity they were selling, and disclosed

to the investor what they found, they would not be held liable for nondisclosure of information

that was not discovered in the process of that investigation.

The entire broker-dealer community quickly institutionalized, as a standard practice, the

conducting of due diligence investigations of any stock offerings in which they involved

themselves. Originally the term was limited to public offerings of equity investments, but over

time it has come to be associated with investigations of private mergers and acquisitions as well.

The term has slowly been adapted for use in other situations.

Due diligence in business transactions

Due Diligence can be defined as

1. "The examination of a potential target for merger, acquisition, privatization or similar

corporate finance transaction normally by a buyer.

2. A reasonable investigation focusing on material future matters.

3. An examination being achieved by asking certain key questions, including, do we buy, how do

we structure the acquisition and how much do we pay?

4. An examination aiming to make an acquisition decision via the principles of valuation and

shareholder value analysis."

The Due Diligence process (framework) can be divided into nine distinct areas:

Compatibility audit.

Financial audit.

Macro-environment audit.

Legal/environmental audit.

Marketing audit.

Production audit.

Management audit.

Information systems audit.

Reconciliation audit.

It is essential that the concepts of valuations (shareholder value analysis) be linked into a due

diligence process. This is in order to reduce the number of failed mergers and acquisitions.In this

regard two new audit areas have been incorporated into the Due Diligence framework the

Compatibility Audit which deals with the strategic components of the transaction and in

particular the need to add shareholder value and the Reconciliation audit, which

links/consolidates other audit areas together via a formal valuation in order to test whether

shareholder value will be added.

In business transactions, the due diligence process varies for different types of companies. The

relevant areas of concern may include the financial, legal, labor, tax, IT, environment and

market/commercial situation of the company. Other areas include intellectual property, real and

personal property, insurance and liability coverage, debt instrument review, employee benefits

and labor matters, immigration, and international transactions.

IPO: Due Diligence

During the due diligence phase, the company, its underwriters, and their attorneys will focus on

the registration statement. This phase will require the company to thoroughly review its business

and to substantiate all claims in the registration statement. For example, if a company claims that

it "will have significant first-mover and time-to-market advantages as a software-based solution

in the Internet postage market," the company must be able to back up that claim. Indeed, the

Securities and Exchange Commission may ask for such data. This review may also uncover

additional information that needs to be addressed or disclosed.

Besides inspecting the registration statement, the underwriters and counsel for both parties will

also question company officers and key employees. This will include a thorough discussion of

the company's business and marketing plans, revenue projections, product development road

map, and intellectual property portfolio, with an emphasis on identifying potential pitfalls. The

due diligence team will also speak with third parties, such as customers, retailers, and suppliers.

After all, problems with partners in the supply and distribution chain can cascade back to the

company itself. For example, a financially troubled customer may tie up a company's inventory

in a bankruptcy court proceeding, or a supplier of a key component may face an extended

shutdown as it irons out Y2K-related problems with its factory automation software.

This attention to detail is required for both brand-new dot.com companies and well-seasoned

corporations alike. Even Goldman Sachs, a veteran investment banking firm, provided this litany

of risk factors in its registration statement.

Example: Goldman Sachs Registration Statement

MARKET FLUCTUATIONS COULD ADVERSELY AFFECT OUR BUSINESSES IN

MANY WAYS

·Losses from Trading and Investment Activity

·Lower Revenues from Investment Banking Activity

·Lower Revenues from Commissions and Asset Management Fees

·Concentration of Risk

·Ineffectiveness of Hedges

·Prolonged Market Downturn

·Other Risks Increased by Market Risk

OUR RISK MANAGEMENT POLICIES AND PROCEDURES MAY LEAVE US

EXPOSED TO UNIDENTIFIED OR UNANTICIPATED RISK

LIQUIDITY RISK COULD IMPAIR OUR ABILITY TO FUND OPERATIONS AND

JEOPARDIZE OUR FINANCIAL CONDITION

·Continuous Borrowing Needs

·Dependence on Access to Short-Term Debt Markets

·Dependence on Ability to Sell Assets

·Dependence on Credit Ratings

CREDIT RISK EXPOSES US TO LOSSES CAUSED BY FINANCIAL OR OTHER

PROBLEMS EXPERIENCED BY THIRD PARTIES

·Increased Credit Exposure in Recent Years

·Country Risk

·Systemic Risk

·Uncertainty in Managing Credit Risk

FIRM AND THIRD-PARTY COMPUTER SYSTEMS MAY NOT ACHIEVE YEAR 2000

READINESS -- YEAR 2000 READINESS DISCLOSURE

OTHER OPERATIONAL RISKS MAY DISRUPT OUR BUSINESSES, RESULT IN

REGULATORY ACTION AGAINST US, OR LIMIT OUR GROWTH

LEGAL AND REGULATORY RISKS ARE INHERENT AND SUBSTANTIAL IN OUR

BUSINESSES

·Exposure to Legal Liability; Rising Litigation Costs

·Extensive Regulation of the Firm

·Legal Restrictions on Our Clients

EMPLOYEE MISCONDUCT COULD HARM THE FIRM AND IS DIFFICULT TO

DETECT AND DETER

THE FINANCIAL SERVICE INDUSTRY IS INTENSELY COMPETITIVE AND

RAPIDLY CONSOLIDATING

·Trend toward Consolidation and Increasing Competition

·Increased Need for Capital

·Competition in Non-U.S. Markets

·Competition from Alternative Trading Systems

WE ARE EXPOSED TO RISKS IN EMERGING AND OTHER MARKETS

OUR CONVERSION TO CORPORATE FORM MAY ADVERSELY AFFECT OUR

ABILITY TO RECRUIT, RETAIN, AND MOTIVATE KEY EMPLOYEES

THE FIRM WILL BE CONTROLLED BY ITS PRINCIPAL SHAREHOLDERS AND

WILL BE SUBJECT TO ANTI-TAKEOVER PROVISIONS

OUR SHARE PRICE MAY DECLINE DUE TO SHARES ELIGIBLE FOR FUTURE

SALE

THERE HAS BEEN NO PRIOR MARKET FOR THE COMMON STOCK, AND THE

MARKET PRICE OF THE SHARES WILL FLUCTUATE

INVESTORS IN THE OFFERINGS WILL EXPERIENCE IMMEDIATE AND

SUBSTANTIAL DILUTION

The third leg of the due diligence review involves an audit of company records. Again, the team

will be looking for hidden problems in the company's corporate documents, licenses, and

material contracts.

Finally, the company and its employees should be sensitive to personal matters that may affect

an initial public offering. For example, a confidential settlement between a senior executive and

a plaintiff for a fraud-related case, even if it had no merits, may affect public perception of the

company and its leadership. Accordingly, a frank discussion with counsel is encouraged.

Due Diligence Considerations, Process & Timing

Buyer Due Diligence (DD) on a business (going concern) acquisition is the process of verifying

that a prospective buyer is purchasing what he THINKS he is purchasing, and that the

information he has been provided thus far by brokers and sellers is accurate within a reasonable

degree of tolerance to the buyer. Due to serious concerns about confidentiality, disruption of

current and future business, and time and expense, in depth DD is generally conducted after a

binding agreement is in place and earnest money has been provided. Earnest money is refunded

only if specific contingencies cited in the agreement are not met, (such as financing) or if due

diligence uncovers material facts in dispute with the prior representations on which an Offer, or

at least an LOI (letter of intent) was based. Some degree of exploration and analysis of the

business, its viability, its fit with the buyer prospect’s experience, skills, and financial resources

should begin the minute a buyer starts considering the opportunity. No one in the process wants

to waste time, money and energy on a deal that cannot or will not happen. Many times the

exploration process will not get past the first look at the offering prospectus or first meeting, as

one side or the other recognizes this deal is not mutually beneficial. If there are brokers or

alternative advisors representing the buyer and seller, he or she will understand the buyer’s need

for information to make a decision, and also the need to respect the seller’s confidentiality. So,

the process will go step by step with additional information provided as a buyer is apparently

more qualified and serious. This article focuses on the DD that will occur when a buyer gets past

the initial stages and has come to some terms with the seller.

Once there is an agreement in place, DD is a mandatory step in purchasing any business. Put

simply, a buyer must do his homework, and know precisely what he is buying. This may be

relatively painless with an honest seller and well organized business, presented by a professional

broker. But, it can be a trying process, especially if a business is not well organized, the seller

has something to hide, and/or a buyer is not both reasonable and prepared for the investigation.

Buyers are encouraged to engage the assistance of a CPA with some small business experience

to make the process far more efficient and productive. In depth due diligence is not a ‘free look

period’ in which a buyer can decide if he likes or does not like “anything at all” about the

business. Extensive DD simply cannot occur with every prospect on a business. The seller cannot

be asked to commit the kind of time and energy, and expense for advisors, potential exposure to

employees, vendors and customers required for due diligence of his ongoing business unless a

buyer is committed to the purchase. Measurable contingencies and due diligence requests should

be precisely listed at the outset of the process, often in the LOI or Offer document, or through the

provision of a DD list.

The objective is to ensure the buyer gets all the material facts required to make a fully informed

decision and assessment of the true condition of the business while not disrupting the seller’s

business unduly. To this end, timing is critical. Generally, a buyer has 2-3 weeks to accomplish

this process while working around the schedules of the seller, the seller’s accountant, and their

own accountant. It is best to work out some type of planned schedule in advance so everyone’s

expectations are met and we do not have disagreements or unnecessary delays.

Pre-Offer or LOI, most buyers will already have obtained and reviewed financial statements and

tax returns in order to define the price and terms that will work for the deal. If not, this is step

one. Many businesses require outside financing, and no deal will take place without this, so at

least a loan proposal is commonly required before any other DD that involves the seller’s time

begins. If a lender is providing financing, the buyer essentially has a secondary DD partner; the

lender will be conducting their own DD, and they generally have a lot of experience with this.

Financials will be analyzed, and the fact that the tax returns were indeed filed and accepted by

the IRS will be verified by the lender.

Once a buyer has a loan proposal, or even better, a loan commitment, the parts of due diligence

that open the seller up to exposure and potential business damage, can begin. If there are any

other major contingencies, these should be tackled next. For example, insurance is an issue for

many businesses—workers’ comp, liability, fleet, contractors’. It is often best to start with the

current providers, but only with the seller’s permission and even an introduction. Financial DD

should be scheduled during this time, as it will generally entail coordinating meetings with

several people. Often the best route is to have the seller’s CPA meet with the buyer’s CPA, with

any information not available at the CPA’s office to be provided by the seller. If the seller’s

accounting records are available via QuickBooks or Peachtree Accounting, and do not contain

the type of proprietary info that should not be handed over until closing, the buyer will have the

luxury of looking at the accounting records at their own leisure. Otherwise, this may be done

with some restrictions in the accountant’s or seller’s office. If any reports, customer or vendor

accounts appear unusual in any way, a paper trail can be followed to track orders, billings,

deposits, etc. Financial DD on most small businesses can be accomplished in 1-2 days of focused

work if everyone co-operates.

The closing attorney or buyer’s attorney will do a lien and law suit search, and work with the

seller to clear any old liens that may be incorrectly showing as active. Other liens will generally

be cleared at Closing with payments made directly to lenders or creditors by the Closing attorney

with funds from the transaction. If any problems are uncovered, the buyer will be informed.

Employment, asset, and operations questions not answered prior to DD should be addressed to

the seller and/or their broker for responses. This is sometimes done in an interview session, or

simply via e-mail, fax, etc. If the business has sellable inventory, this will need to be counted or

the final amount being purchased somehow agreed-upon. The method needs to be decided ASAP

so that an outside firm can be retained if needed. The inventory value should be finalized the

night before closing. Often a “last minute” adjustment cannot be made within the third party loan

amount, so the parties need to decide how adjustments to the estimated inventory will be

handled.

If there are key employees or customers that must be interviewed prior to closing, these meetings

will only take place when all other contingencies have been met, unless the seller has already

informed these people in advance of his intentions. The seller does not want the potential of a

major change to disrupt his business unless the deal is virtually certain to close. The seller does

not want to have to present a new person as the next owner of his business, only to have to “take

it back” next week. Generally, employees find out that a business has a new owner after closing

at a meeting, with refreshments. The new owners and the seller reassure the employees that

THEY are the reason for the success of the business, and are very much wanted and needed by

the new owners. If the new owner treads slowly in making major changes, most often all

employees will stay on, as they have no reason to leave a job that they need and like, and lose

their source of income. Buyers should have time to evaluate all employees in the working

environment before deciding to terminate existing staff, especially since often times the new

owner does not know how to run the business without those employees.

Customers of a business are typically only concerned about one thing: are their needs being met?

They do not care if Joe or Sam owns the business, so long as your plans do not upset their prior

working relationship with the business. Quality, service, on-time, at the price they were quoted,

etc. is why they deal with the business in question. If there is an existing written contract, it may

or may not be invalidated by a sale. Buyers should have their attorneys advise them as to the

nature of the contract, with input from the seller. Many times, the contract will continue under

new owners; or it may be assumable, or the buyer may need a new contract. If a new contract is

required, the buyer clearly needs assurance that they can obtain a contract that can be signed

“subject to” closing on the new business. Most businesses do not inform any of their customers

about a change in ownership until after a sale. In fact, in order to ensure a continuity of

relationships and a smooth transition, many sellers introduce their buyers as a “partner” who has

begun working with them so that they can grow the business and better serve that customer’s

needs. The seller remains in the background in case of any questions, and soon the customers are

just as comfortable with the new owner as they were with the old owner . . . because their needs

are being met!

The buyer also has many “transitional” tasks that are not so much DD on the business as set-up

requirements to ensure that the business will run smoothly the day after closing. These often

involve an accountant and/or attorney who assists with the establishment of a new legal entity to

purchase and hold the business assets, and all related tax ID’s, licenses, bank accounts, etc. The

seller and broker will also be a good resource for what accounts need to be contacted to ensure

continuity of services, utilities, and purchases for the going concern.

During due diligence, buyers may find some inconsistencies with what they previously were told

or understood, or perhaps some anomalies in the business records. Naturally, these must be

questioned, but a buyer should not over-react and assume this is fatal to a deal. Communication

errors can and do occur with many parties to a deal, and small businesses often have “do it

yourself” bookkeeping, which can lead to some interesting issues. However, many of these can

be resolved. Neither principal should over-react to a DD hurdle or there will be no deal, and

neither party gets what they want. Buyers and their advisors should speak with the seller and

their advisors about their concerns so that the problems can hopefully be addressed. If a business

turns out not to be as originally presented in terms of revenue, profits, personnel, contracts with

customers, or assets—factors which affect the value of a business—then a renegotiation of price

and terms will often be called for. On the other hand, no business is perfect (as the cliché goes)

and a buyer cannot expect to renegotiate based on a non-material difference. Normally, both

sides of the deal will have spent a lot of time, energy and money getting to this point, and will

have a true desire to make the deal work.

Two different sample due diligence lists are attached

Buyer’s Due Diligence Checklist #1(asset sale)

1. Verify income tax returns have been filed and accurately reflect previously analyzed financial

statements. Verify that there are sensible explanations for any material differences in income and

expense categories between the tax return & financials.

2. Review A/P & A/R aging reports for unusual accounts or patterns. Review status of any

customers with large balances due.

3. Verify State Sales Tax payments are up-to-date. Ensure buyer has Federal EIN & GA

Taxpayer ID number, plus sales tax account if needed.

4. Verify Workmen’s Comp payments and any other insurance plans are up-to-date. Ensure

buyer obtains Workmen’s Comp and all other necessary insurance—fleet, liability, property, fire,

etc.

5. Determine physical inventory to establish existence & condition of inventory—you count, you

hire counters? (Just before Closing) Funds need to pay for positive adjustment?

6. Review equipment & maintenance records to ensure that required maintenance has not been

put off to dress up earnings pre-sale.

7. Obtain seller assurances that all liabilities secured by equipment have been fully disclosed.

Verify with lien search.

8. Obtain seller assurance that obligations under any contracts of the company have been

disclosed. Review any company contracts for potential liabilities or future payments.

9. Check employee vacation accruals and scheduled pay increases for future. Determine who is

liable for any bonuses or vacations and how compensation occurs. Any employee contracts

required?

10. Contact administrators of any company payroll, health insurance, or retirement plans to

establish new accounts. Other vendor accounts that need transfer or set up?

11. Assess the likelihood of undisclosed miscellaneous liabilities, and obtain general

representations & warranties by the Seller in that there are no known undisclosed or contingent

liabilities.

12. Conduct a UCC Filing Search under the official name of the business and all DBA’s.

(Closing Atty generally does this)

13. Conduct a public records search in the local county court records to uncover undisclosed

liens or litigation. (Closing Atty generally does this)

14. Review, assume, obtain new Lease for premises. Meet with Landlord & get Lease executed.

15. Obtain new bank account(s) –requires Corp. Entity docs- and credit card processing, plus

business license(s).

This is just a basic list with those items most commonly done. Buyer is responsible for assuring

their own due diligence is done to their satisfaction, and at their expense. Broker is not able to

give legal or accounting advice.

Due Diligence Checklist # 2

Following is a common list of the information needed for a more thorough Due Diligence. Some

of the information may not be applicable to a specific business. Some of the information will be

obtained through examination of the data on-site, through the business accountant, or it could be

provided directly by the seller via interview or written response. Buyers should always take into

consideration the capabilities and systems of the business and its owners when requesting

information.

Personnel

1. Methods and levels of pay for employees

2. Bonus and incentive pay plans

3. Pension and deferred compensation plans-Contact info for administrators

4. Vacations entitlements

5. Benefits programs – automobiles, personal loans, insurance, …

6. Recent payroll report—payroll company or employee leasing? Contact info

7. Resume or job description of each employee and reporting structure

Operations

8. Agreements with insurance companies, suppliers, customers, vendors, service providers, and

others.

9. Description of procedures or functions… operations manual, copy of any forms used

available?

10. Systems/reports used to manage the business

Marketing & Sales

11. Competition -advantages and disadvantages

12. Pricing policies

13. Copy of any agreements with major customers

14. Trade names held

15. Forecast of market growth and company sales growth

16. Details or advertising and promotions campaigns

17. Warranty /guarantee provisions for past sales

Accounting Records

18. Financial statements for last three FY’s

19. Quick Books/Peachtree company file available?

20. Copy of Bank statements and copy of checks– only if need to verify items.

21. Tax return for last three years

22. History of changes in accounting policies

23. Current accounts receivables & accounts payable aging

24. History of bad debts

25. Details of any unusual payment arrangements with anyone-vendors, employees

26. Asset lists and records for fixed assets & inventory—counting and valuation methods.

27. Dates and results of any federal, state, and local tax audits.

General

28. Listing and assessment of past, pending, and potential litigation

29. Details on insurance coverage and history of losses covered by insurance

30. Banking relationships

Land, Building, & Assets

31. Any description and valuation data on building if being sold

32. Information on any environmental issues, recent Phase I?

33. List of all vehicles – year and model, market value, current mileage

34. Equipment list w/ market value—any leased equipment? Can it be paid off or assumed?

35. Any assets need to be replaced soon? Are any assets used in the business not owned by the

business? (owned by you personally, by employees)

36. Capital expenses/major maintenance –capital expenses and major maintenance expenses

currently needed or reasonably expected to be needed in the next year

37. List of all website URL’s, e-mail addresses owned/used by business

38. List of all patents, licenses, other intangibles

39. Lease on premises—assumable or new lease required. Landlord contact OK? Contact info.

The DD is a process which is more structured than the preparation of a Business Plan. It is

confined both in time and in subjects: Legal, Financial, Technical, Marketing, Controls.

The Marketing Plan

Must include the following elements:

A brief history of the business (to show its track performance and growth).

Points regarding the political, legal (licenses) and competitive environment.

A vision of the business in the future.

Products and services and their uses.

Comparison of the firm's products and services to those of the competitors.

Warranties, guarantees and after-sales service.

Development of new products or services.

A general overview of the market and market segmentation.

Is the market rising or falling (the trend: past and future).

What customer needs do the products / services satisfy.

Which markets segments do we concentrate on and why.

What factors are important in the customer's decision to buy (or not to buy).

A list of the direct competitors and a short description of each.

The strengths and weaknesses of the competitors relative to the firm.

Missing information regarding the markets, the clients and the competitors.

Planned market research.

A sales forecast by product group.

The pricing strategy (how is pricing decided).

Promotion of the sales of the products (including a description of the sales force, sales-

related incentives, sales targets, training of the sales personnel, special offers, dealerships,

telemarketing and sales support). Attach a flow chart of the purchasing process from the

moment that the client is approached by the sales force until he buys the product.

Marketing and advertising campaigns (including cost estimates) - broken by market and

by media.

Distribution of the products.

A flow chart describing the receipt of orders, invoicing, shipping.

Customer after-sales service (hotline, support, maintenance, complaints, upgrades, etc.).

Customer loyalty (example: churn rate and how is it monitored and controlled).

Legal Details

Full name of the firm.

Ownership of the firm.

Court registration documents.

Copies of all protocols of the Board of Directors and the General Assembly of

Shareholders.

Signatory rights backed by the appropriate decisions.

The charter (statute) of the firm and other incorporation documents.

Copies of licenses granted to the firm.

A legal opinion regarding the above licenses.

A list of lawsuit that were filed against the firm and that the firm filed against third

parties (litigation) plus a list of disputes which are likely to reach the courts.

Legal opinions regarding the possible outcomes of all the lawsuits and disputes including

their potential influence on the firm.

Financial Due Diligence

Last 3 years income statements of the firm or of constituents of the firm, if the firm is the result

of a merger. The statements have to include:

Balance Sheets;

Income Statements;

Cash Flow statements;

Audit reports (preferably done according to the International Accounting Standards, or, if

the firm is looking to raise money in the USA, in accordance with FASB);

Cash Flow Projections and the assumptions underlying them.

Controls

Accounting systems used;

Methods to price products and services;

Payment terms, collections of debts and ageing of receivables;

Introduction of international accounting standards;

Monitoring of sales;

Monitoring of orders and shipments;

Keeping of records, filing, archives;

Cost accounting system;

Budgeting and budget monitoring and controls;

Internal audits (frequency and procedures);

External audits (frequency and procedures);

The banks that the firm is working with: history, references, balances.

Technical Plan

Description of manufacturing processes (hardware, software, communications, other);

Need for know-how, technological transfer and licensing required;

Suppliers of equipment, software, services (including offers);

Manpower (skilled and unskilled);

Infrastructure (power, water, etc.);

Transport and communications (example: satellites, lines, receivers, transmitters);

Raw materials: sources, cost and quality;

Relations with suppliers and support industries;

Import restrictions or licensing (where applicable);

Sites, technical specification;

Environmental issues and how they are addressed;

Leases, special arrangements;

Integration of new operations into existing ones (protocols, etc.).

A successful due diligence is the key to an eventual investment. This is a process much more

serious and important than the preparation of the Business Plan.